~ The Legislative Blog of the NJ League of Municipalities

Interest Arbitration Cap to Expire At End of Year

If the Legislature and Governor fail to take action, the 2% cap on Interest Arbitration will expire on December 31, 2017, the same day that the final report and recommendations of the Police and Fire Public Interest Arbitration Impact Task Force are due. The permanent 2% property tax levy cap, however, will remain in effect. Setting the stage for local officials to be forced to either raise property taxes by a referendum or cut other municipal services to fund an arbitration award for a police or fire contract.

Now is the time to take action to make sure this critical management tool, which has successfully curtailed property tax increases, is preserved.

In 2010, Governor Christie signed into law bipartisan reforms to the Arbitration process that took effect January 1, 2011. The reforms:

capped arbitration awards on economic factors to no more than 2%,

provided for random selection of arbitrators,

expedited the determination of awards,

required the arbitrator to provide a written report detailing the weight accorded to each of the required considerations, and

expedited the appeal process.

As a result of this reform arbitration filings dramatically decreased from over 100 per year to 26 in 2013. The 2010 law included an April 1, 2014 sunset on a key element of the reforms, the capping of arbitration awards.

In 2014, Governor Christie again signed into law a unanimous bipartisan extension of the cap to December 31, 2017. The 2014 law also:

changed the calculation of the 2% cap from the aggregate amount to compounding at the end of each agreement year,

increased the time for the arbitrator to render a decision in the case from 45 days to 90 days,

required the arbitrator to conduct an initial meeting as a mediation session to effect a voluntary resolution of the impasse,

extended the time for an aggrieved party to file a notice of appeal of the arbitrator’s decision from 7 days to 14 days,

increased the time frame for PERC to render its decision in an appeal of an arbitration award from 30 days to 60 days,

increased the maximum pay for arbitrators from $7,500 to $10,000, and

extended the reporting requirements of the Police and Fire Public Interest Arbitration Impact Task Force to December 31, 2017.

As a result of this reform, arbitration filings continued to dramatically decrease from 89 fillings in 2014 to 9 in 2016.

The most recent Police and Fire Public Interest Arbitration Impact Task Force report notes that preliminary data “shows that the economic impact of the 2% cap recognized in the 2014 Final Report has continued.” In fact, the Interest Arbitration Salary Increase Analysis found:

Year

No. Voluntary Settlements

Average Increase Base Salary – Voluntary Settlements

No. Arbitration Awards

Average Increase Base Salary – Arbitration Awards

2015

9

1.73%

6

1.71%

2014

16

1.61%

12

1.69%

2013

8

1.96%

27

1.89%

2012

29

1.82%

36

1.98%

These reforms marked a dramatic change to the arbitration process and assisted municipalities to control the never-ending rise in public safety personnel costs. The interest arbitration cap took a playing field that was weighted heavily to the benefit of the unions and leveled it so that collective bargaining was once again a “give and take” between the parties. There are many examples where municipalities’ negotiated contracts with significant savings because the unions recognized that if they went to arbitration they would only receive a 2% increase. Steps were lengthened, sick leave incentives were reduced or eliminated, and vacation time was reduced, providing savings to taxpayers.

We all depend on the service of our police, firefighters and first responders, and greatly respect and admire their service. But we also respect and admire the service of all public employees, and a failure to extend the cap on interest arbitration would force local budget makers to make deep cuts in services.

The arbitration cap is about budgeting within our means, keeping a control on local taxes, and providing a level playing field at the bargaining table. Awards which exceed 2%, while there is 2% levy cap in place on municipalities, could immediately threaten the funding for all other municipal services. And, in the not-too-distant future, such awards could force local budget makers to reduce public safety staffing levels, as fewer local employees steadily take home higher percentages of local funds.

Now is not the time to lift the limit on arbitration awards. If the cap on interest arbitration expires, while the 2% property tax levy cap remains in effect, municipalities will be forced to reduce or eliminate municipal services in order to fund interest arbitration awards.

As long as there is a 2% cap on the tax levy there must be a 2% cap on the interest arbitration awards.

If you have not done so already, we urge you to pass a resolution (word or pdf) urging the State Legislature and Governor to extend the 2% cap on Police and Fire Arbitration Contract Awards for an additional five years, at which time the Legislature will have hard data to examine and then make a final decision as to whether this law should be made permanent.

And local leaders should continue education their state officials, candidates for office and the general public on why this management tool must be extended.